Credit card transactions fall to nine-year low
The value of credit card transaction dropped to £8.7bn in April – half the value recorded in April 2019, according to data from UK Finance.
The number of credit card transactions also fell by 45.9% to 163 million which is the lowest level in over nine years.
It also revealed that outstanding balances on credit cards fell by almost £4.7bn in April 2020, the largest monthly fall in over a decade, as many people opted to make repayments rather than spend on their credit cards.
This follows a £3.1bn fall in outstanding balances on credit cards in March 2020.
Contactless card spending was also knocked in the first full month of lockdown with 404 million transactions – down 44.3% from the 725 million recorded in the previous period.
Further, the total value of all contactless transactions was £4.1bn, a 40% decrease from £6.8bn in the same month of 2019.
UK Finance also noted that April was the first month when the average value of a contactless payment surpassed £10. This may be a result of fewer low-value transactions, such as on public transport where contactless cards are often used for payment. From April, the contactless card limit was increased from £30 to £45.
While the number of debit card transactions in April 2020 fell 5.1% on the previous year, the total value of transactions actually rose by 0.9% to £51.8bn.
UK Finance said this suggests some consumers may be acting more cautiously amid the current economic uncertainty and choosing to spend on their debit rather than credit cards.
But while spending in shops was all but restricted, a record proportion of card transactions were made online instead.
A third of the total value of debit and credit card transactions was made online, up from 29.6% the previous year.
‘Coronavirus has changed how we spend money’
Eric Leenders, managing director of personal finance, UK Finance, said: “The Covid-19 crisis has significantly changed how, where and when people spend their money.
“The banking and finance industry has put in place a number of measures to help customers adapt to this new economic environment and pay in a way that suits them. This includes increasing the contactless limit to £45 and offering deferrals on credit card repayments.
“As the economy begins to open up, the sector will continue to support customers to help them through this difficult time.”
‘We’ll see lots of people financially exposed’
Laura Suter, personal finance analyst at AJ Bell said the figures only tell half the story.
“While lots of people reduced credit card spending and even paid off some of their balances, lots of others will have ramped up their spending on plastic and their debt levels. Those people who lost their job or saw a cut to income and had no financial safety net to fall back on will have seen their debt soar during the current crisis.
“While banks are offering payment holidays and waiving some fees, these are only temporary sticking plasters and as this tide of help is wound back we’ll see lots of people financially exposed and struggling to meet the cost of their debt,” she said.